How much money you need per month: your number
The average cost of living is an honest figure and a useless one. You are not the average.
In short
Your monthly cost of living has three steps: add what you pay every month regardless, add the yearly costs divided by twelve, and add the variable part measured over thirty days. Almost nobody does the third, and it decides the answer — variable spending is usually a quarter to two fifths of the total. Together the three give the real floor your life runs on.
It is one of the most common money questions, and almost every answer to it is a national average. That figure is fine for a news item and no use for a decision: it cannot tell you whether you can change jobs, move, or stop agreeing to things you would rather not.
The three floors of your number
Fixed
Every month, no exceptions
Rent, utilities, transport, debt, subscriptions
Yearly ÷ 12
The part nobody divides
Insurance, tax, tuition, servicing
Variable, measured
30 days of records
Food, going out, health — everything that differs
Step one: the fixed part
The easy one, and almost nobody gets it wrong. Rent or mortgage, utilities, internet and phone, the commute, debt payments, subscriptions.
One warning: subscriptions are always underestimated, and the error sits around thirty to forty percent. The arithmetic is in how much you spend on subscriptions.
Step two: the yearly costs, divided by twelve
This is where it starts to sting — and it is exactly what separates a number that holds from a number that breaks in March.
Insurance, tax, tuition, the annual service, the dentist, the renewal of something. None of it arrives monthly and all of it has to be paid. Add up a year and divide by twelve: what comes out is part of what your month costs, even in a month when no bill lands.
In most households this adds eight to fifteen percent to the total, and it is precisely the part that turns "tight but fine" into a credit card used in September.
Step three: variable, measured rather than guessed
Groceries, eating out, clothes, the pharmacy, taxis. This is the large part — a quarter to two fifths — and the only one you cannot read off a statement.
There is exactly one method: thirty days of recording everything while changing nothing about your behaviour. The full version is in where does my money go.
Estimating from memory produces a figure thirty to fifty percent below the real one, always in the same direction. That is why so many people are sure they are managing and find out otherwise in December.
What to do with the result
Three things, all of them decisions there was previously nothing to base on.
- Compare it with what comes in. If fixed plus yearly takes more than seventy percent of your income, no amount of cutting coffee fixes that: the levers are large ones. The detail is in how to stop living paycheck to paycheck.
- Multiply by three. That is the cushion almost everyone needs — and now you know what it is three of.
- Divide by days. That is what you can spend today without breaking the month: how much can I spend today.
Why your number looks nothing like the average
Because the average mixes people paying rent with people who own outright, and a capital city with a small town. The gap between those cases is wider than the gap between spending sensibly and spending badly.
The only number that decides anything is yours. It takes thirty days to find out.
Common questions
- How much does one person need per month?
- It depends so heavily on the city and on rent that any general figure misleads more than it helps: within one country, the gap between two cities is wider than the gap between careful and careless. The three-step calculation gives your own number in a month.
- Should savings count as part of the cost of living?
- No. The cost of living is what living costs; savings are a decision about the surplus. Mixing them hides the number you were looking for, which is the minimum you need.
- How often should it be recalculated?
- Once a year, and immediately after a change of rent, job or city. Where prices move quickly it is more sensible to revisit the three or four categories that shift each month than to redo the whole thing.
Try it on your own money
Caudal is an expense tracker in Spanish, English and Russian. Several currencies, goals, debts, a shared household budget. Recording an expense takes three seconds.
Start free